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Specific performance is a court order requiring a party to perform their obligations under the contract. It essentially means that a court can force the parties to carry out the agreement, even if there has been a breach. It is essential for businesses to be aware of their contractual obligations and rights. This article will explore specific performance, when your business may require it and how you may seek it. 

When Would I Need it?

Your business may seek specific performance in a variety of scenarios where you require the other party to complete the contract. For example, suppose you are purchasing a unique product or service from a supplier, and they later refuse to provide it to you. A court can intervene to give an order of specific performance to force the supplier to provide what was promised under the contract. 

What Do I Need To Seek Specific Performance?

A court can only grant specific performance in particular circumstances where you meet certain requirements. Therefore, you must establish the following two circumstances when seeking specific performance. 

Binding Contract

A binding contract must exist. If a contract is not binding, it cannot give rise to specific performance. When examining the contract, elements you may not have thought necessary at the drafting stage become relevant. This includes:

  • how the document is executed;
  • how the terms you agree to operate; and
  • whether mistake, misrepresentation or undue influence was involved in creating the contract. 

Breach of Contract

Secondly, you must establish a breach of the binding contract. The breach must be actual or anticipated. An actual breach occurs when one party refuses to perform their contractual obligations. On the other hand, an anticipatory breach occurs when one party threatens not to perform their contractual obligations.

When Will a Court Refuse Specific Performance?

Specific performance is a discretionary remedy. This means that a court will order it based on the unique facts of a particular case. Additionally, specific performance is not the primary remedy a court will use. Let us explore circumstances where a court will refuse specific performance.

Damages Are Sufficient

The most common barrier to ordering specific performance is if an award for damages will suffice. In many cases, awarding damages (money) is enough to compensate the affected party. However, if the actual amount of damage cannot be calculated or accurately estimated, then the court may consider a remedy of specific performance.

It Forces the Parties to Maintain a Relationship

Courts will not make an order for specific performance if it compels the defendant (the party that has breached the contract) to maintain a personal relationship with the plaintiff. This usually applies to contracts involving personal services, such as employment agreements or contractor agreements.

Obligations Are Not Clear

A court will not order a party to perform a contract where the obligations are ambiguous. This should provide further incentive to ensure your contracts clarify the goods or services you are receiving or providing. Thus, to ensure your contracts are clear and certain, we recommend you have your contracts reviewed or drafted by lawyers. 

Results in Unconscionable Hardship on the Defendant

To determine unconscionable (or unreasonable) hardship, the court will look to balance the hardship placed on the defendant with the plaintiff. 

Additional circumstances a court may reject specific perfomance include:

  • if the plaintiff is not ready or willing to perform their obligations;
  • if the defendant cannot perform their obligations; and
  • if the plaintiff has also substantially breached the contract, this will enable the defendant to terminate in most cases.

Not Complying With a Specific Performance Order

Not complying with any court order is serious and can result in heavy fines and even imprisonment.

Alternative Remedies

As previously mentioned, damages is the most common remedy in contract breach claims. Let us explore the types of damages available. 

Compensatory Damages 

Courts often award these damages for breach of contract. As the name suggests, they are intended to compensate the plaintiff for the loss suffered due to the breach. Moreover, they and are not intended to punish the defendant. This type of award aims to put the plaintiff in the same position as if the breach had never occurred, not a better position. It also requires the court to assess an estimate of damages accurately.

Nominal Damages 

Nominal damages are suitable if the contract breach did not cause real damage. For example, suppose the plaintiff can prove that a breach occurred but cannot establish a tangible loss. The word nominal reflects that these damages are relatively small or low. 

Expectation Damages 

This remedy is for an expected loss due to the contract breach. Here, the plaintiff needs to reasonably anticipate the amount of loss if the defendant had fulfilled their contractual obligations. As with compensatory damages, expectation damages intend to place the plaintiff in the same position as if the breach had never occurred. 

Liquidated Damages 

Liquidated damages are pre-agreed between the parties to the contract. Sometimes, a contract will outline what the breaching party needs to pay the other side if they cannot perform their obligations under the contract. One requirement is that the liquidated damage is not a penalty or punishment. If it is, it will be considered invalid by the court.

Key Takeaways

You should seek legal advice if you believe that the other party in a contract should perform their obligations. Specific performance may be an option, but only if your situation meets certain conditions. Namely, you must have a binding contract, and the other party must breach this. Furthermore, specific performance is discretionary. A court may refuse this remedy where damages are sufficient, if it would unduly burden the parties, or force them to maintain a relationship. 

If you require assistance seeking specific performance for a breach of contract, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions

What type of remedy is specific performance?

Specific performance is an equitable remedy.

Why might someone seek specific performance?

A party may seek specific performance where fulfilling the contract is more beneficial than money to cover the cost of the loss. This will depend on the unique circumstances of the case. For example, if the other party agreed to sell a particularly valuable product to you, and, following a contract, changes their mind, receiving financial compensation may be inadequate for you. However, you should be aware that seeking specific performance is not a guarantee that a court will grant you this.

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